From 1 September 2025, a significant new corporate criminal offence will come into force in the UK: the Failure to Prevent Fraud offence. This marks a shift in the UK’s approach to corporate accountability and fraud prevention, and businesses should review their policies and procedures now to ensure compliance.
What Is the New Offence?
The new offence makes a company or partnership criminally liable if a person associated with it, such as an employee, agent, or subsidiary, commits a fraud offence intending to benefit the organisation. Importantly, the offence applies regardless of whether senior management was aware of the fraud. The government’s guidance on the offence includes the following example:
A large company is seeking investments. The accounting department deliberately manipulates the accounts to overstate the profits. (…) The company could be prosecuted (…) and could be liable for failure to prevent fraud, unless the court determines that it had reasonable procedures in place to prevent such a fraud.
Who Is in Scope?
The offence applies to “large organisations” which meet at least two of the following criteria:
- Annual turnover exceeding £36 million.
- Balance sheet total exceeding £18 million.
- More than 250 employees.
These thresholds are assessed on a group-wide basis, meaning that subsidiaries of large groups may also fall within scope.
What Is the Penalty?
Organisations found guilty of failing to prevent fraud face unlimited fines. The reputational damage and regulatory consequences could also be severe.
What Is the Defence?
Importantly, the organisation will not be liable if it can show that it had reasonable fraud prevention procedures in place at the time the offence occurred. The government has published detailed guidance to help organisations understand what constitutes reasonable procedures. These include:
- Risk assessments tailored to the organisation’s size and sector.
- Clear policies and procedures.
- Effective training and communication.
- Monitoring and review mechanisms.
- Strong tone from the top of the organisation and governance oversight.
Next Steps for Businesses
With the 1 September 2025 deadline fast approaching, organisations should:
- Conduct a fraud risk assessment across all business units and jurisdictions.
- Review and update internal policies to ensure they address fraud risks effectively.
- Implement training programmes for staff.
- Establish clear reporting and escalation procedures for suspected fraud.
- Document all prevention efforts to support a potential defence.
For further information or guidance, contact BHW’s Corporate & Commercial department by emailing info@bhwsolicitors.com or by calling 0116 289 7000.